Owners Title Insurance Coverage:
Protect Your Investment

Get an Owner's Policy to Protect Your Investment

Buying a new home is one of life’s most gratifying experiences and is likely the biggest investment you will ever make.  Be sure not to overlook the single most important step in the process of closing on your home – the purchase of owner’s title insurance.  An owner’s title insurance policy provides both peace of mind and financial protection against covered prior losses and defects, and provides legal defense for covered risks. There can be any number of prior problems that remain undisclosed after the most meticulous search of public records.  These prior hidden “defects” may not be discovered for months or even years after you purchase your property.  You could be forced to spend substantial money on a legal defense to protect your rights.

Make sure you purchase an owner’s title insurance policy to protect your investment.  For a one-time fee an owner’s policy can protect your important property rights for as long as you or your heirs own the property.

Enhanced vs. Standard Coverage
The enhanced coverage Homeowner’s Policy provides the most complete title coverage available, including protection against a number of covered matters beyond those included in a standard coverage policy.  Below is a comparison chart showing the differences in coverage given under a standard ALTA owner’s policy and an enhanced coverage Homeowner’s Policy (EHP).
Coverage Comparison
Standard ALTA Owner’s Policy
Homeowner’s Policy of Title Insurance (EHP)
Title to the estate or interest described in Schedule A being vested other than as stated therein
YES
YES
Any defect in or lien or encumbrance on the title
YES
YES
Unmarketability of the title
YES
YES
Lack of right of access to and from the land
YES
YES
You do not have both actual vehicular and pedestrian access to and from the land based upon a legal right
NO
YES
You are forced to correct or remove an existing violation of any covenant, condition or restriction affecting the land
NO*
YES
Your title is lost or taken because of a violation of any covenant, condition or restriction, which occurred before you acquired your title
NO*
YES
You are unable to obtain a building permit; you are required to correct or remove the violation; or someone else has a legal right to, and does, refuse to perform a contract to purchase the land, lease it or make a mortgage loan on it because of an existing violation of a subdivision law or regulation affecting the land
NO*
YES
You are forced to remove or remedy your existing structures, or any part of them because any portion was built without obtaining a building permit from the proper government office
NO*
YES
You are forced to remove or remedy your existing structures, or any part of them because they violate an existing zoning law or zoning regulation
NO*
YES
You cannot use the land because use as a single-family residence violates an existing zoning law or zoning regulation
NO*
YES
You are forced to remove your existing structures because they encroach onto your neighbor’s land
YES
YES
Someone has a legal right to, and does, refuse to perform a contract to purchase the land, lease it or make a mortgage loan on it because your neighbor’s existing structures encroach onto the land
YES
YES
You are forced to remove your existing structures, which encroach onto an easement or over a building set-back line
YES
YES
Your existing structures are damaged because of the exercise of a right to maintain or use any easement affecting the land
YES
YES
Your existing improvements, including lawns, shrubbery or trees, are damaged because of future exercise of right to use the surface of the land for the extraction or development of minerals, water or any other substance
NO
YES
Someone else tries to enforce a discriminatory covenant , condition or restriction that they claim affects your title, which is based upon race, color, religion, sex, handicap, familial status or national origin
NO*
YES
A taxing authority assesses supplemental real estate taxes not previously assessed against the land for any period before the policy date because of construction or a change of ownership or use that occurred before the policy date
NO
YES
Your neighbor builds any structures after the policy date which encroach onto the land
NO
YES
The residence with the address is not located on the land at the policy date
NO
YES
The map, if any, attached to the policy does not show the correct location of the land according to the public records
NO
YES

Notes: Covered risks listed are occurring after the policy date.  This policy is for use, when requested, for one-to-four family residences only.  It should not be used for vacant land or for new construction.  If issued on new construction,  you must independently verify the payment of all lienable construction costs and the issuance of all required occupancy permits.  Deductibles may apply with respect to certain of the coverages afforded in this policy.  Contact Innslake Title for specific information as to any deductibles which pertain to the coverages in the Homeowner’s Policy of Title Insurance.  For additional questions contact Innslake Title. *Coverage for the item is not provided in the ALTA Owner’s Policy UNLESS notice of the covenant, ordinance, statute or regulation is recorded in the public land records.

Parts of a Title Policy

The owner’s policy has five sections: covered risks, the exclusions from coverage, Schedule A, Schedule B and the conditions. Click here for a pdf.

1. Covered Risks

 

owners_policy-1This section lists what kinds of risks the policy insures against. However, the policy makes it clear that the insurance of the listed risks are subject to (1) the Exclusions listed following the Covered Risks, (2) any exceptions listed in Schedule B, and (3) the Conditions.  In the most current ALTA Owner’s policy, there are ten covered risks listed in the policy.  Some of the most important covered risks are:

  1. the risk that someone else owns your property
  2. that there is some defect or encumbrance on your title caused by fraud or forgery
  3. any liens for real estate taxes or assessments that are due but unpaid
  4. that your title is unmarketable, that is, you are unable to sell your property to a purchaser because of a title defect
  5. right of access to and from your land.

Review your owner’s policy or ask your title agent about the covered risks included in your policy.

 

2. Exclusions

 

owners_policy-3Exclusions limit the coverage of the policy. They deal with issues that are outside the control of the title company. The ALTA owner’s policy contains five exclusions, which include matters such as governmental regulations on the land and eminent domain, as well as title matters created or agreed to by the insured, or title defects known to the insured but not disclosed in writing to the title company prior to the date of the policy.  The policy does not insure against any defect or title issue that is created or attaches to the property after the date of the policy.  Also, the policy does not insure against the effects of bankruptcy law on the transaction creating the insured interest.

 

 

 

 

3. Schedule A

 

owners_policy-4Schedule A sets forth the specific information on the title and policy, such as the date of policy, the amount of insurance, the insured, the legal description of the land insured by the policy and the estate insured, such as fee simple or leasehold.  Schedule A must be attached to the policy in order for the policy to be valid.

 

 

 

 

 

 

 

 

4. Schedule B

 

owners_policy-5Schedule B lists the various exceptions to the title that the title company found when it performed its title search. Common exceptions would be things such as prior unreleased mortgages on the property, easements, taxes, restrictions on the use of the property, and any other limitations on the title such as homestead rights or survey issues if no survey has been performed. By listing various items as exceptions, the title company is telling the insured that these items are not covered by the title policy, and that the title company will not pay a claim or defend against a claim based on these excepted items.

 

5. Conditions

 

owners_policy-6This section outlines the relationship between the insured and the title company.  Paragraph 1 contains the definitions of certain terms used in the policy. Terms such as “Insured,” “Insured Claimant,” “Knowledge” and “Public Records” are defined so as to eliminate any ambiguity.  There are several different paragraphs setting out how a claim under the policy is handled, including how to provide notice of a claim, what is required to prove loss, and the requirement that the insured must cooperate with the title company in the handling of the claim. Click here to learn how to file a claim. The Conditions describe the rights of the title company to pay or settle the claim, and the determination, extent and limitation of liability. Most policies also contain a paragraph that allows the insured or the title company to demand arbitration if the amount is under $2 million.

Cost of Title Insurance

The cost of a title insurance policy relative to the cost of a property transaction is about one-half to one percent of the purchase price. The premium is based on the purchase price of the property, generally determined by the value of the land plus any improvements.
As an example, the cost for an owner’s policy for a home in Washington, D.C., listed at $474,000 and assuming a 20 percent down payment, is around $1,100. Over the average duration of homeownership, that spreads out to about $85 annually or about $7 per month. The longer you own your property, the overall cost decreases even more.

Who Pays

Title insurance industry practices vary due to differences in state laws and local real estate customs. Who pays for the owner’s policy varies from state to state. On the East Coast, the buyer typically pays. The seller normally pays on the West Coast. A discount may be available when both the owner’s and loan policy are purchased simultaneously. Ask your title company who pays in your area and if a discount is available.

It’s also important to note that the cost for title insurance may include other services provided by the title company such as the title search or conducting the closing. When comparing one rate to another, be sure to get detailed information on what is included in that rate, so you are comparing equally.

Regulation

Title insurance rates are regulated by state insurance departments. In addition, title insurance and real estate closing practices are regulated by the Consumer Financial Protection Bureau (CFPB).

State regulators in some states, including Florida, New Mexico and Texas, require all companies to charge the same rate for title insurance. Other states such as New York, Pennsylvania, New Jersey, Ohio and Delaware also have uniform rates. When shopping in these states, you will receive similar rates for title insurance from each company.

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